Zacks Investment Management

In today’s Steady Investor, we look at current events in the market and key takeaways for investors to consider, such as:

• The IMF cuts 2023 global growth forecast
• The Fed’s update on the interest rates cycle
• China’s COVID-19 lockdowns and their impact on economic activity
• The labor market shows signs of softening

The International Monetary Fund Expects Slowing Global Growth – The IMF updated its forecast for global economic growth in 2022 and 2023, and the message was clear – expect a slowdown. Forecasts are for 3.2% global GDP growth in 2022, a figure that is expected to fall to 2.7% in 2023. The IMF attributed their lowered forecasts to the impact of inflation and the effects of monetary tightening from central banks across the developed world (save for Japan). The IMF also sees a continued drag from the Russia – Ukraine war and China’s economic slowdown tied to Covid-19 lockdowns and major headwinds in the property sector. The IMF is likely correct that some level of economic slowing is likely to occur given these conditions, but investors should not put too much stock in the actual figures – they’re almost always wrong.¹

^{____________________________________________________________________________________________________________________}

Overcome Investor Bias in Today’s Market!

In a volatile market, investors tend to have different biases, such as fear of loss, that affects their decision-making process.

The first step is to be aware of your potential biases, and we can help with our free guide, Three Steps to Overcoming Investment Behavioral Bias. You’ll learn how to:

• Recognize your own investing biases
• Re-examine your portfolio
• Take key steps to avoid bias

If you have $500,000 or more to invest, download our guide Three Steps to Overcoming Investment Behavioral Bias.² Simply click on the link below to get your copy today!
 
Download Zacks Guide, Three Steps to Overcoming Investment Behavioral Bias²

^{____________________________________________________________________________________________________________________}

Hints that the Interest Rate Cycle is Nearing a Peak? The equity markets have been overwhelmingly focused on inflation and central bank policy in 2022. The key question has been when the Federal Reserve will stop or at least pause rate increases, and at what level the fed funds rate will ultimately settle in 2023. To date, the market has been too optimistic in its forecasts for where the fed-funds rate would settle, only to see strong labor market data and continued strong inflation reset those expectations higher. Last week, two Federal Reserve officials started giving hints about the possibility of allowing rates to plateau at a certain level. Fed Vice Chairwoman Lael Brainard acknowledged that rate increases take time to make their way through the economy, implying that the Fed should likely stop raising rates before inflation comes down to the 2% to 3% range. Similarly, Chicago Fed President Charles Evans said he thought it would be appropriate for the Fed to pause rate hikes at 4.5% next March, to give the economy some time to absorb the rate increases and see how the data responds.³

Still Mired by Covid-19 Lockdowns – As much of the developed world has returned to largely normal day-to-day activities, China continues to impose strict Covid-19 restrictions and protocols. These policies have been hurting economic activity. Official data showed that consumer spending over the 7-day ‘National Day’ holiday plummeted compared to 2021 figures, and services activity fell into contractionary territory in September. The slowdown in economic activity is widespread – people are traveling less, with trips during the National Day holiday down 18% year-over-year and 39% from 2019. Tourism spending has also dropped sharply, coming in at $40 billion during the holiday, or 26% lower than in 2021. Services activity has also notably fallen into contractionary territory, with S&P Global reporting that China’s services purchasing managers index (PMI) fell to 49.3 in September from 55.0 in August.⁴

Labor Market Shows Signs of Softening – A key component of the Federal Reserve’s plan to lower inflation is to cool off the labor market, where tight conditions have been pressuring wages – and thus inflation – higher. September payroll figures showed early signs of softening, with employment growing by 263,000, which was notably lower than the previous 8-month average of 439,000. Wage growth also decelerated to 0.4% month-over-month and 5% from a year earlier, an encouraging sign but not nearly to the level the Fed wants to see.⁵

Three Steps to Overcoming Investor Bias – News and headlines may cause you to worry about what’s next for the market, but I recommend making decisions based on data, instead of emotional attachment.

The best way to overcome investor bias is to understand its impact on your decision-making process. That’s why we have prepared this educational guide, Three Steps to Overcoming Investment Behavioral Bias⁶, that can help you become aware of your own biases, and overcome them. You’ll learn:

• The two main types of biases that affect investors: Cognitive and Emotional
• Specific examples of biased decision-making that can negatively impact your portfolio
• Three essential actions you can take to counteract the natural investor tendencies toward bias

If you have $500,000 or more to invest and are ready to learn more, click on the link below to get your copy today!

Disclosure